Tax time will be up on really soon, and the IRS has decided to streamline a few things that you need to know about as a small business owner. This is a public service post to keep you from scrambling with your tax paperwork in 2017. The government has moved up some filing deadlines that you need to know about if you have payroll employees or contractors. The law requires you to file either a W-2 form (for full-time employees) or a 1099-MISC form (for contractors). Not filing these critical documents can cause a serious issue, so please take note of the information below.
The Deal on W-2 filings
In the past, you were required to send employees a copy of their W-2s by January 31, but you had until February 28 to send copies to the Social Security Administration. Now you've got one deadline for both: January 31. That means that you need to scramble to ensure that all your employee payroll and tax information is accurate, then send them both off in the coming weeks.
What About 1099-MISC Forms?
If you don't have employees and instead work with contractors that you have paid more than $600 to this year, you will need to file a 1099-MISC form for each one. You don't pay payroll taxes on what your contractors earn, because they are responsible for paying them on their personal taxes. But you do need to file the 1099-MISC form, and in 2017, it's the same deal as with the W-2s: everything is due by January 31. That means not only do you need to send the 1099-MISC form to your contractors, but you also need to submit it to the IRS by then.
Why All The Changes?
The IRS has not historically been known for expediency, but this tiny change might move it in the right direction. Through the Consolidated Appropriations Act passed by Congress last year, the IRS has been approved to have one day for all parties (IRS, Social Security, and your employees or contractors) to receive these forms.
That means the IRS has serious potential to reduce the number of "suspicious" returns, which, of course, take them time to process. When a taxpayer files a return and that W-2 is already in the system, the IRS can quickly verify the information on the tax return against that form and process it faster. So in an ideal world, that would mean fewer audits for taxpayers like you and me!
How to Get Those Forms Ready
The easiest way to prepare W-2 or 1099-MISC forms is to use a payroll service provider like ADP. Many of these companies will automatically generate these reports using the data you've submitted for payroll. They'll even mail or email them to your employees as well as the appropriate federal offices. Be aware that your service provider may charge an extra fee for this. (It all depends on the number of employees or contractors you have).
Alternately, you can go through an online filing service like 1099 Online. For a small fee per 1099-MISC, they'll file the forms on your behalf to all parties. Typically, the more forms you need to file, the less you'll pay. So prices range from about $.55 each to $3.49 each. You'll need to know how much you paid contractors, as well as their social security numbers or tax ID numbers.
You can file your employee W-2s online directly with the Social Security Administration. All you need is an account and your employee's information. And the IRS has a system for you to file your 1099-MISC, though it's a little less user-friendly than some of the other options. You may need to wait to receive a password in the mail, so you'll need plenty of time if you choose this option.
And if you prefer to go old school, you can always print the forms from the IRS and SSA and mail them in! However, if you file your forms, make sure you put a reminder on your calendar on January 1 so you have plenty of time to do so.
Reduce Your Tax Time Stress
There's no benefit in waiting until the last minute to prepare your W-2 and 1099-MISC forms, so do what you can now to prep for 2017. Make sure that you accountant or bookkeeper is on top of it. Or if you are a DIY with your accounting, make sure you've logged all expenses you've accrued with contractors, and if you don't have their contact information and social security or tax ID numbers, now is the time to gather that information. Having an updated W-9 on file is the best way to ensure you have this, so plan to require a new one from each contractor come January.
As a general rule, you should have everyone who works with you update their employment paperwork before the year's end so that you're ready to roll in January. The new IRS rules shouldn't be too stressful if you manage your accounting paperwork monthly, get up to date W9's, plan ahead and take note of the new filing dates on your calendar!
This blog was originally published as IRS Tax Alert: The Deadline for W-2s and 1099s Has Moved Up on www.succeedasyourownboss.com